Which Party Ruined the Economy?

Here’s a quick, hopefully thought-provoking post.

Under Pres. Reagan there was a large expansion in the size of the federal government. Who had control of Congress during those years? Democrats. Pres. Clinton gets credit for having a good economy and balancing the budget but who is responsible for making and passing budgets? Congress. Pres. Clinton did the politically expedient thing and worked with the Republicans in Congress to get the budget balanced (although, the budget would prove to be unsustainable because it was based on unrealistic expectations of future tax income; the balanced budget was in trouble starting in late 2000 and early 2001 when a recession hit).

We had a good economy in the 1990s with Republicans in charge of Congress and with a Democrat in the White House. Things went south with the Internet bubble burst in 2000 and 2001. That was the start of a recession made much worse by the events of 9/11. Thankfully, the “Bush” tax cuts (Republicans were still in control of Congress) were passed. They helped shorten the recession. What was not good was passing them and increasing our federal spending. The economy was going along quite well until the housing market crashed in 2006-2007. This was one of the main factors resulting in the biggest recession the U.S. has faced. I’m not going to blame any political party for the recession but I have to point out that Democrats (and many Republicans) helped put in place government housing policies in the 1990s that were factors in the housing bubble burst. Further, Democrats were the ones opposed to regulations Republicans were trying to put in place that might have reduced the housing market crisis. Both parties are culpable for their actions or inactions though.

In 2006 (2007) Democrats took control of the House and Senate. In 2007 the recession officially started. Things were bad with the Republican Pres. Bush and a Democrat majority in Congress. They passed some bailout policies that were weakly effective at best and harmful at worst. Then Pres. Obama took office in 2009 (2008 election). He nearly had a Democrat supermajority in Congress with which to work. It seemed the perfect time to get things done to help the economy but instead of focusing on the economy, or at least trying to stay out of its way (there were other bailouts, some that seemed effective – the auto bailouts – but most have no measurable effects other than a huge deficit), Pres. Obama and the Democrats passed an environmental bill (which no one had the opportunity to read before it was passed) and a gigantic health insurance bill (which also was not read before it was passed).

In 2010, after about 2 years in office, Pres. Obama said he was serious now about the economy. Things were still bad. In 2010 (starting tenures in 2011), Republicans took control of the House and gained seats in the Senate. In 2011 the economy finally started to improve after Democrats no longer had complete control of Congress. It’s still rough but getting better.

What I think is interesting is that the economy seems to flourish when Republicans are in charge of Congress and it seems to flounder when Democrats are in charge of Congress. It also seems that our economy is finally starting to recover in spite of the worst efforts of many Democrats (and many Republicans who either went along or didn’t fight bills enough). It seems like the best course of action would have been either to do nothing or pass smaller, more focused stimulus measures. Tax cuts always work to improve the economy and are usually the best way to stimulate the economy. They just have to be accompanied by a reduction in spending. Basically, the government should get out of the way of the economy and provide focused regulations when necessary.

This post is biased. I wrote it this way on purpose to provide a counter-point to many arguments I have heard or read that praise Pres. Clinton for the good economy of the late 1990s, blame Pres. Bush for the 2007 recession, and praise Pres. Obama for the current economic improvements. There are many people who blame all good things on actions of Democrats and all bad things on actions of Republicans. That’s such a gross oversimplification of who things actually work that it’s not an effective argument (well, it is often effective because many people do not think critically and just accept it as truth). I wrote this post to show that I can argue just the opposite – that poor economies are the result of the actions of Democrats; after all, Congress is in charge of spending and passing laws and our economy suffered the most with Democrats in charge.

What’s the truth? Probably something in the middle (Democrats and Republicans are both responsible). Our federal government is too big and certainly too inefficient. I’d argue that the inefficiency (bureaucracy) is worse than the size of government. We need a Congress and a president who are willing and able to increase the efficiency of the government in part by reducing its footprint.

We Elected the Wrong President

We elected the wrong president. What is almost as bad is that Republicans nominated the wrong person to run against Pres. Obama. What led to our electing the wrong president?

After eight years of Pres. Bush, the country was fed up with Republicans, the economy (although we had some really good years during Pres. Bush’s presidency), and the wars. Not all of us were fed up with Pres. Bush but most people were. Of course, many people never gave him a chance or the benefit of the doubt because of the controversies Democrats created over the 2000 election. I was not a fan of Pres. Bush’s fiscal policies in general but the treatment of him by much of the media and many liberals was inexcusable. The media should be able to and should criticize presidents but the relentless barrage on Pres. Bush and his administration was almost without precedent and bordered on unethical. Pres. Bush also had the misfortune to have his tenure come during the maturation of the internet and rise of social media. The vitriol exploded and the administration did not know how to deal with it (or did not want to waste time dealing with it, unlike the present administration). Part of it was the fact that Pres. Bush was not a “good politician” (that’s not a criticism); he was successful in politics but was not a politician like Pres. Clinton or Pres. Obama. After eight years, our country wanted change.

This is where Pres. Obama came in. In 2006 Congress changed from a Republican majority to a Democrat majority. This was the beginning of the overall governmental change. For a time Sen. Clinton had the lead in the Democrat race for nomination. She had years of experience in Washington and had many connections. However, she was a “Clinton” and had her own history of scandals as well as those of her husband. She did not stand a chance once the media got behind and helped create the juggernaut that was Obama. He was young, cool, polished, intelligent, and media-savvy. As a community organizer he knew how to set up grassroots campaigns and raise funds in small amounts from many people. He was also African-American, which rather than hurting him, helped him tremendously. He had the African-American vote locked up and sealed. Overall, African-Americans compose about 13% of the U.S. population. Obama had virtually all of the African-American vote. Pres. Obama, smartly, ran his campaign on the promise of “Change you can believe in!” He was the person ostensibly from outside Washington who would re-create Washington, giving it an extreme makeover and more metrosexual appeal. Obama was to be a new JFK with the beautiful wife, cute kids, and polished rhetoric. Maybe he could build Camelot anew within the marbled pillars of the White House. He, to some of his followers, is a savior who not only cures cancer with a sympathetic look but also plays a decent game of basketball and looks good without a shirt on. Obama received the Democrat nomination also in part because the economy became of larger concern than the War Against Terror and the war in Iraq at a pivotal moment last year. Sen. Clinton suffered because of this and Sen. Obama benefited.

A similar thing happened in the Republican primary, although for different reasons. Mitt Romney was running 2nd to John McCain but in reality the race was close. However, Mike Huckabee proved to be more than a stinging gnat for Mitt Romney. Mike Huckabee pulled many of Christian conservatives away from Romney because they, in part, were already reticent about supporting a Mormon. Mormons, according to many Evangelicals, are the worst kind of cult; the worst thing to happen to Christianity since the feeding of early Christians to lions by the Romans. Mormons had the audacity to believe in and practice plural marriages in the 1800s, a practice many Westerners just cannot seem to stomach. Of course, Evangelicals do not seem to remember that many of their Biblical prophets practiced polygamy as has most of the world throughout most of history. In any case, Mormons are not well-liked among many fundamental Christian groups (or most other religions for that matter). Romney, in addition to losing supporters to Huckabee, also had the misfortune of the war in Iraq becoming the major issue within the Republican Party for a short while. The main focus on the economy did not come until after Romney withdrew and really not until after McCain was nominated. The war was McCain’s strong point while the economy was (and is) Romney’s.

More than a year ago I stated that Mitt Romney is “the man for the economic crisis in America.” We did not realize at the time how bad the economy really was becoming. That was unfortunate. Had the economy remained the major issue, Mitt Romney would have received the Republican nomination. He has proven business acumen, rescuing troubled businesses over and over (including the 2002 Salt Lake City Olympics). While experience can sometimes be over-rated, Mitt Romney’s economic experience is not over-rated and cannot be over-stated. He would have been a president who would not have to rely completely on advisers to understand and establish economic policies. He could have worked even with a Democrat-controlled Congress, just as he did as governor of Massachusetts, to get sound fiscal policies passed (although the Legislature in Massachusetts did not like many of Romney’s fiscal policies, which were too conservative for them).

Instead of Romney we are left with a spend-happy Pres. Obama and a Congress that is even more spend-happy. The stimulus and bailout packages might help in the short-term, should the money actually ever be released, but they set a precedent for future spending and debt. We purchase short-term and ephemeral gains at the expense of the livelihood of our children and their children. Even with the so-called stimulus package, we face unemployment rates that rival Europe’s (at least Europe’s in a good economic climate). As many European nations move away from socialist economic policy, America moves towards it. Even China has largely moved away from a socialist economy. We should let the market run itself without too much government intervention. I’m not idealistic enough to believe that a purely capitalist nation without government intervention is the best way but less governmental intervention and meddling is usually better.

While I think Pres. Obama is a good person trying the best he knows how to do, I do not believe he is the right person for the job. We elected the wrong person. Instead of Obama, we should have elected Mitt Romney. Fortunately we might have that opportunity in 2012. My only worry is that the economy will have recovered by then and many of us will believe that just because the symptoms are gone, the illness is gone. However, just like antibiotics, we need to extend the treatment long after the symptoms are gone in order to get rid of the disease. I believe that Obama’s fiscal policies contribute to the disease instead of curing it. Maybe Obama can cure cancer but he cannot fix the economy; Congress cannot fix it either. Only the economy can fix the economy. Governments can help the economy but they cannot repair it; they can, however, make it worse by meddling. Again, this does not mean governments should leave economies completely untouched but our government should worry first about plugging the gaping holes in its bank accounts before it tries to do anything with the broader economy. We need fiscal responsibility, not this wanton spending our government is doing.

Mitt Romney was ready to answer the call to service but we rejected him. Hopefully we will not make the same mistake again in 2012 when we will need him more than ever to help clean up the mess the current administration and Congress are making.

“Let Detroit Go Bankrupt” – NYTimes.com

Op-Ed Contributor – Let Detroit Go Bankrupt – NYTimes.com.

This article by Mitt Romney was published back in mid November. He provides his perspective on the “Big 3” bailout. As a very successful businessman, his opinion is worth something.

I’ll post a few good quotes from the article.

“Detroit needs a turnaround, not a check.”

“Retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers. That extra burden is estimated to be more than $2,000 per car.”

“Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th.”

“Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation.”

“Starving research and development is like eating the seed corn.”

“I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today.”

The King is Dead! Long Live the King!

Obama, in a keen maneuver showing how he is bringing change to Washington, proposed a radical new plan to help the economy. I’ll quote from a CNN headline: “Obama begins push for tax cuts, more spending.”

It seems he learned something from Pres. Bush and Congress after all. I like this bold new fiscal plan. Let’s bring in less money while spending more money because that will magically fix the nation’s financial problems. I understand that on a theoretical macro economic scale, it’s not a terrible plan because the goal is to stimulate the economy by freeing up liquid assets. This in turn grows the economy, bringing in more tax revenues. At this point government spending will be reduced and Poof! the economy is good again.

However, the government never seems to get to the reduced spending part. Cutting taxes and increasing spending is a very difficult way to stimulate the economy – it requires much financial acumen as well as the willingness and ability to stop the plan as soon as possible. It’s a good plan in the short-term but is not sustainable. On top of that, it’s amoral at best.

The best way to increase financial stability and to make the economy stronger in the long-term is for the government to reduce taxes and reduce spending. They don’t even have to reduce taxes at first, but they have to learn to live within their means.

The only change so far in Washington is that change the government is “borrowing” from taxpayers and the extra change the government mints to help “fund” its spending habits. I know my critique is simplistic but Obama’s “stimulus plan” basically boils down to “tax less, spend more.”

McCain Temporarily Suspends Campaign!

Sen. John McCain, in a move that shows integrity, announced that he would suspend his campaign until a deal was reached concerning the proposed bailout of Wall Street. Some Democrats, typically, are criticizing him for this move saying that it is much more important that a debate between McCain and Obama take place. That’s more important than a senator doing his job?! Obama’s response was: “It is going to be part of the president’s job to deal with more than one thing at once. It’s more important than ever to present ourselves to the American people.” In other words, “Look, I can deal with lots of things at once like a President has to.” The problem is that he isn’t dealing with a lot of things at once – he’s campaigning but not doing his job as Senator. Of course, Obama historically has mainly just worked with his party on issues so maybe he really isn’t needed in Washington for a bipartisan effort. McCain has worked with those not of his party a number of times over the years and is known for “crossing the aisle” if needed. I applaud McCain’s move – it shows that he is committed to his job, even if it costs him the Presidency (of course, he might have done some informal polling to see how this act would be viewed but that still doesn’t mean he isn’t doing the right thing for the right reason).

A Plea for a Return of Fiscal Responsibility

I’ve written a number of posts focusing mainly on Republicans and conservative ideals and haven’t written much recently about Democrats or liberal ideals. While I’ve never downplayed my conservative beliefs, when I started this blog (back when it was hosted by Blogger) it was intended to be a fairly balanced look at U.S. politics. I’ve drifted away from that some because I felt the need to share my conservative voice with others, even if few read my blog. I’m an open critic of the Bush administration’s fiscal policies. I know Pres. Bush inherited an economy in a recession that was quickly struck by the horror of 9-11. The economy faltered but then grew stronger; it was strong for a few years and recently turned downwards. I do not believe we are in a recession and I agree with John McCain that the fundamentals of the economy (e.g., businesses, innovation, hard work, etc.) are still strong.

We are passing through some hard times (I’m not trying to minimize any individual suffering but we are in a nation with hundreds of millions of people) but so far it has not been anything serious. Gas prices are high but I believe that high gas prices are a blessing – they lead to the development of alternative potentially cheaper and more environmentally-friendly technologies. The stock market has been volatile but stock markets always are. My mutual fund hasn’t been performing well over the past year but this particular fund is a long-term investment (it did quite well the previous year) and stock markets always go up over time given enough time.

I don’t believe that U.S. presidents have that much influence on the economy – they certainly have some but in reality it’s pretty limited. Congress probably has a little more influence on the economy but still pretty limited. However, I’m still pretty disgusted by all the deficit spending our nation is doing (again, you can’t put all the blame on Pres. Bush; after all, Congress has to actually set all the spending, the President just approves it; further, there are fewer tax revenues when the economy isn’t as strong, which also affects the deficit). What happened to good old fiscal conservatism? Where are the politicians who believe we shouldn’t spend more than we earn, except in emergencies? Many states run just fine and have budget surpluses. Granted, states receive a lot of money from the federal government but the problem is out-of-control spending in general. We are a consumerist society. We have to have the latest and greatest now! Our government seems to think that we have to try and fund as much as we can, after all, each of us is entitled to handouts from the government.

The recent economic woes have little to do with the government; they stem largely from from our entitlement society. People expect a lot from the government (we should all expect a lot of the government, just not from); many expect too much. We also feel entitled to our individual rights over individual and social responsibility. This leads to excessive consumption by society as a whole, which is also reflected in governmental spending. If we can’t control our spending, how can we expect our government to control its spending? I’m not completely opposed to “big government”; our world is very complex today, much more complex than when the country was founded. The government has to be more involved than it was in the past. However, if our spending is higher than our income, we must curtail our spending. I’m aware that many economists feel that keeping a deficit is necessary for healthy economic growth and that balanced budgets hold us back from growth potential; however, we’ve been increasing our federal deficit and national debt for so long that we have to get it under control. I’m not an advocate of raising taxes, especially when the government wastes so much money. You never solve a problem like our government has by throwing more money at it. This means that the only way to eliminate our deficit and national debt is to seriously reduce our spending. It’s painful – no one likes having their money taken away. It’s not an easy job because people would complain and lobby against the spending cuts. Most people who want the government to reduce spending don’t want the government to take away their money.

The easiest way to start is to eliminate redundancies and close loopholes. Simplifying and streamlining the tax codes and process would immediately produce sizable benefits. We should eliminate many of the farm subsidies, for example. Right now the government is like a massive, largely mismanaged company. Departments need to be modernized and streamlined. Consultants need to be pulled in to help with the process. The government needs to be treated more like a corporation (I’m not saying it should be a corporation, it just needs to be managed more like one). We need to elect officials who have the guts to tackle the economic problems of the government.